Assume that the central bank increases the reserve requirement. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the real risk-free interest rate and GDP Price Index in the context of the Three-Sector-Model?
a. The real risk-free interest rate rises, and GDP Price Index rises.
b. The real risk-free interest rate and GDP Price Index remain the same.
c. The real risk-free interest rate falls, and GDP Price Index falls.
d. There is not enough information to determine what happens to these two macroeconomic variables.
e. The real risk-free interest rate rises, and GDP Price Index falls.
.E
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When there is an upward rise in the volume of economic activity, the economy is said to be in a recession
a. True b. False Indicate whether the statement is true or false
Other things the same, as the price level falls, the exchange rate rises. A rise in the exchange rate leads to a decrease in net exports
a. True b. False Indicate whether the statement is true or false
The real interest rate is the:
A. the interest rate charged on a loan in dollar terms. B. market interest rate. C. annual percentage increase in the purchasing power of a financial asset. D. annual percentage increase in the nominal value of a financial asset.
Suppose that the quantity of cars demanded exceeds the quantity of cars supplied. We would expect that:
A. the price of cars will increase. B. the price of cars will decrease. C. the supply will increase (supply will shift to the right) to meet the demand. D. the demand will decrease (demand will shift to the left) to meet the supply.